Which sectors in the Balearic Islands are at risk due to the price increases caused by the war in Iran?

PalmTwo weeks after the start of the war between Israel and the United States (US) against Iran, The ending is uncertainAlthough the government continues to advocate for a swift resolution to the conflict, this week it began a series of meetings with sectors that could be most affected by the price increases accompanying the war. There is still insufficient official data to estimate the magnitude of the impact. However, currently, everything points to a fuel price increase that is having a ripple effect on multiple sectors: from transportation (exacerbated by the island's isolation) to the cost of groceries, as well as agriculture, travel, and mobility.

Although sources from the Ministry of Economy and Finance assure that They have no data on the effects on prices, The choice of sectors for preparing potential measures offers clues about the government's main concerns. In addition to meetings with representatives of employers' associations and major unions, the government is also meeting with representatives from the transport, agricultural, distribution, shipping, industrial, and construction sectors.

Energy and Transport

"Santiago Abascal will have to say that gasoline prices are rising to grovel before [Donald] Trump," said PSIB spokesperson Iago Negueruela, referring to the Vox leader. "Let him explain that to the self-employed and the truckers," he continued. The Balearic Islands are heavily dependent on imported energy, especially fossil fuels. The increase in oil and gas prices due to the war with Iran, a major global producer, is impacting electricity, gasoline, and diesel costs. This affects household budgets: gasoline prices are already approaching €2 per liter. But it is especially hard on the transport sector. In fact, before Monday's meeting with the government, the Balearic Transport Federation's Business Association for Freight Transport threatened strikes if measures are not taken to improve the situation. According to their calculations, fuel has gone from representing 33% of the sector's expenses to 50%. Therefore, it has requested compensation mechanisms linked to fuel prices, similar to those implemented when the war broke out in Ukraine.

Insularity impacts every product

Everything the Islands import arrives by ship or plane. If fuel is more expensive, and therefore transport is also more expensive, this in turn makes food, building materials, and basic goods more expensive. This affects the prices of the shopping basket and, therefore, residents' consumer spending. But it also affects sectors that have to produce in the Islands, such as construction and the industrial sector.

The extent of this is still unknown. However, the Savings Banks Foundation FuncasA private analysis center based in Spain warned last Friday that the war in Iran "forces a revision of inflation forecasts, which are now highly uncertain, as energy prices depend on the unpredictable course of the conflict." For now, it warned, the inflation rate could rise to between 3.2% and 4.5%.

And tourism?

Tourism is the main sector in the Balearic Islands. The Majorca Hotel Federation (FEHM) has, for now, limited itself to closely monitoring the conflict, but has not altered its projections for the upcoming season. If fuel prices increase, travel will be more expensive, which could discourage both tourists and residents from traveling. However, if the conflict affects destinations that compete with the Islands, it could benefit them.